The recent devastating fires in Los Angeles are going to make the state’s insurance crisis that much worse for home and property owners in much of California including those some 350 miles away in Santa Cruz County.

The news that State Farm, the largest insurance company in the state, has asked regulators to let it raise property insurance rates by an average of 22% should not have been all that surprising, considering what has come before as wildfires have torn into the availability and cost of policies, especially for property owners in at-risk areas such as the Santa Cruz Mountains.

“Insurance will cost more for customers in California going forward because the risk is greater in California,” State Farm wrote in its message announcing the rate increase request.

State Farm said in a letter released Monday that the recent L.A. fires are threatening its finances and are “the costliest in the history of the company.”

As of Saturday, the company had received more than 8,700 claims stemming from the fires and had paid more than $1 billion to policyholders. But in a letter to California’s insurance commissioner, State Farm representatives said, “We know we will ultimately pay out significantly more.” They wrote that previous years’ losses from natural disasters had caused its credit rating to be downgraded. Without more capital, the company’s said its finances could jeopardize more than 2.8 million policies in the state.

More claims mean higher rates. The 2023 Lahaina, Maui, fires resulted in huge increases for property owners throughout the island, with many unable to get competing quotes from long-held insurers, who raised rates in some cases by more than 100%.

As wildfire losses have multiplied, major insurers like State Farm have been fleeing the state, complaining of regulators’ unwillingness to match price increases to the growing risks posed by more frequent and severe blazes fueled by climate change. California law requires insurance companies to get state regulators’ approval for rate increases of more than 7%.

State Farm is now asking for an “emergency interim approval of additional rate” from the state. Under new rules adopted late last year insurers will soon be allowed to raise rates based on the growing threat of climate change, as well as pass along more of their costs incurred during catastrophic disasters to their customers. In exchange, companies are supposed to write more policies in fire-risk areas where many homeowners have lost coverage.

In March, State Farm dropped 30,000 homeowner policies across California, including nearly 70% of policies in the Palisades area. Unable to find insurance on the private market, many homeowners have turned to the state-backed “insurer of last resort” known as the FAIR Plan.

As of Tuesday, the FAIR Plan had received more than 3,200 claims for damage caused by the Palisades Fire and more than 1,200 for damage caused by the Eaton Fire. If claims exceed the plan’s ability to pay, it can impose a surcharge on its member insurance companies, which in all likelihood would be passed on to homeowners.

The FAIR Plan is struggling to keep up as the number of homeowners it has taken on has more than doubled to around 350,000. Last year FAIR Plan President Victoria Roach told lawmakers,“We are one event away from a large assessment. … We don’t have a lot of money on hand, and we have a lot of exposure out there.”

And as insurance gets even more expensive or unavailable, not only will existing homeowners continue to see rate hikes and lose coverage, but families unable to find insurance will not be able to take out a mortgage to buy a home. In areas at extreme fire risk, including the Santa Cruz Mountains, fewer buyers could mean falling home prices, which in turn could strain local tax bases.

There are no easy answers for any of this, but the ever-worsening insurance crisis should be high priority for state officials and the governor to work with the industry to keep it solvent and willing to provide coverage. There’s really no alternative.